By Avinash Mirajkar
The objective of the Electricity Act 2003 is to develop the electricity industry and promote competition by creating a conducive Open Access (OA) environment.
Most State Electricity Regulatory Commissions (SERCs) have notified terms and conditions of OA regulations and related charges. Though OA has been one of the important drivers of reforms for market development, it has not been implemented in the same spirit as envisaged in the Act. OA at the interstate level has succeeded reasonably well. There are issues in implementation of OA at the state level. Some state governments have issued statutory orders blocking the flow of electricity beyond their boundaries. There is a conflict of interest due to existence of cross subsidies in the retail tariff structure so that state discoms do not lose high-end consumers.
As an exception for extreme situations, the Act has a provision (Section 11) which provides powers to state governments to issue directions to generating companies in respect of operating and maintenance of generating stations in extraordinary circumstances like natural calamity, war etc. These powers have been invoked by several state governments like Karnataka, Tamil Nadu, Odisha and Andhra Pradesh prohibiting export of power from their state on the ground of power shortages. Several CERC orders that OA cannot be restricted by such state government directions were challenged in the High Courts and the matter is subjudice in the Supreme Court.
The Ministry of Power in consultation with the Ministry of Law and Justice Ld. Attorney General of India had issued a clarification way back in September 2011 that all 1 MW and above consumers are deemed to be OA consumers and that the regulator has no jurisdiction over fixing the energy charges for them. All concerned were requested to take the necessary steps to implement provisions relating to OA in the Electricity Act 2003 in light of the said opinion.
However, some SERCs stayed the operationalisation of OA based on the above interpretation.
The OA transactions are supposed to be driven by availability of competitively priced power and quality un-interrupted supply. However, if we look at the recent price trends in short term markets, these remain well below the long term bilateral contract based prices. Even the average prices under the Deviation Settlement Mechanism (Unscheduled Interchange – UI) have dropped to Rs 2 – 2.50/kWh. This may be happening partially because of transmission congestion and reluctance of State discoms to buy power from power exchanges for themselves or not permitting high end consumers to avail this option. Some state discoms are not doing well on the financial front and are hence not in a position to buy power from these sources and prefer load shedding. High end consumers, even though willing to buy power from such sources, are not procuring power because of barricades created by state discoms. NTPC generating stations plant load factor (PLF) has dropped to around 60% recently and its 5000 MW worth capacity is not getting dispatched into the grid. CERC has recently issued regulations for Reserves Regulation Ancillary Services (RRAS) to restore the frequency level within the prescribed band and to relieve congestion in the transmission network.
The other major issue in OA is that state discoms are reluctant to provide standby requirement/support to OA-based consumers. Such a situation leads to a huge impediment to the OA transactions. It is likely that standby requirement of power by the OA consumers during any financial year would arise majorly out of emergency shutdown or planned shutdown of the source generators which cannot be avoided.
ISSUES THAT NEED TO BE ADDRESSED:
(i) Clarity on understanding and interpretation of law regarding OA and effective implementation of legal and policy provisions;
(ii) Clarity on OA eligibility criteria;
(iii) True independence of State Load Dispatch Centre
(iv) Rationalisation of OA charges including surcharge;
(v) Uniform standby arrangement for back-up supply;
(vi) Monitoring of OA transactions by respective State Commissions and;
(vii) Clarity on invoking of Section 11 provisions by State Governments Some measures proposed under Electricity Amendment Bill, 2014 like separation of carriage and content business, multiple supply licensees, exemption from surcharge for renewables etc. are welcome measures. But, the issues enlisted above and especially related to invoking of Section 11, independence of SLDCs and ambiguity in OA eligibility need to be addressed more proactively for successful implementation of OA.
Policy at Customised Energy Solutions (CES)